The recent crackdown on platforms that mix cryptocurrencies, such as Tornado Cash, has raised concerns about the U.S. Securities and Exchange Commission’s (SEC) potential overreach in its efforts to regulate the crypto industry. This crackdown, along with the likely rejection of Ethereum exchange-traded funds (ETFs), further indicates the SEC’s regulatory stance.
Since its case against Ripple, the SEC has been expanding its regulatory reach in the crypto market. It has filed lawsuits against top crypto firms like Coinbase and Binance. The crackdown on platforms like Tornado Cash has led many to question whether the SEC is going too far with its crypto outreach.
One issue that has contributed to the uncertainty in the legal classification of tokens as investment contracts is the lack of consistency in legal rulings. The Ripple case, for example, saw different rulings from Judge Torres and Judge Failla, creating uncertainty about the legal status of tokens.
Amidst this uncertainty, the resignation of two SEC lawyers has been reported. This follows a federal judge’s sanctioning and strong criticism of the SEC for its “gross abuse” of power in a crypto-related case. The resignation of these lawyers is seen as damaging to the SEC’s reputation within the crypto industry.
Similar to Ripple, the SEC has also been targeting Ethereum to subject it to securities laws. It is likely that the SEC will reject the approval of spot Ethereum ETFs, with a decision expected next month. Prominent firms like BlackRock, Grayscale, VanEck, and Ark Invest have applied for approval to list ETFs tracking the spot prices of Ethereum. However, insiders familiar with the discussions have revealed that the SEC has shown little interest in the concept of spot Ether ETFs, indicating a lack of enthusiasm from the regulatory side.